VAR Executives Flee Country After Indictments In New York Corruption Case

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Two executives from a former VAR500 company have fled the country after being indicted as part of an investigation into a New York City payroll project, according to reports.

Reddy Allen, CEO, and his wife Padma Allen, president and CFO, ran TechnoDyne, a Wayne, N.J.-based VAR that allegedly received more than $400 million as a subcontractor in the city's now infamous CityTime payroll project, fled several weeks ago to their native India after being subpoenaed to appear before a grand jury, according to the New York Daily News.

TechnoDyne was No. 295 on CRN's 2010 VAR500, and Padma Allen was previously named in CRN's Diverse 100 list last year. On May 31, the company shut down and fired all employees, according to Newsday. Phone calls to TechnoDyne's Wayne, N.J., office were not answered.

According to the office of the U.S. Attorney of the Southern District of New York, virtually all of the $600 million that New York City paid to implement CityTime, an initiative to modernize the payroll system for city employees, was tainted by fraud.

At least eight people, including the Allens, were indicted Monday, along with an indictment for TechnoDyne as a company. TechnoDyne was the principal subcontractor for the CityTime project under primary contractor Science Applications International Corp. (SAIC).

Between 2003 and 2010, TechnoDyne received the majority of the funding for CityTime, more than $400 million, and the U.S. Attorney's office claims the indicted individuals and TechnoDyne overbilled and otherwise defrauded the city. The CityTime project was initially budgeted for $63 million, according to the U.S. Attorney's office.

"SAIC executives allegedly received millions of dollars in kickbacks in connection with work steered to Technodyne. Specifically, the Indictment alleges that [Gerard] Denault [SAIC's program manager for CityTime] and [Carl] Bell [a systems engineer at SAIC] were each paid $5 by Padma Allen and Reddy Allen for every hour worked by every consultant hired by or through Technodyne," according to a statement from the U.S. Attorney's office. "Denault also received an additional $2 for every hour worked by a consultant for D.A. Solutions and Prime View. As a result, Denault allegedly received over $9 million in kickbacks, and Bell received at least $5 million in kickbacks."

Bell pled guilty to multiple charges relating to CityTime on June 14, according to the U.S. Attorney's office.

The indictment also alleges that because of its participation in the scheme, Technodyne appeared to be a successful and fast-growing company.

"In 2010, Padma Allen was even honored as an Entrepreneur of the Year by a prominent firm [Ernst & Young]. In truth and in fact, however, the engine of Technodyne's growth was the over $400 million in fees on CityTime that the company received in connection with its participation in the fraudulent scheme," according to the U.S. Attorney's office.

The Allens and Technodyne also took steps to conceal the kickbacks they were paying to Denault and Bell by first wiring the funds to bank accounts they controlled in India in the name of other companies affiliated with Technodyne, according to the indictments. Those Indian affiliates then wired the money to the bank accounts created by Denault and Bell, according to the indictments.

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